The National Conference of Insurance Legislators says Congress should include state insurance regulators in any systemic risk oversight effort.
New York state Sen. James Seward, R-Oneonta, N.Y., the president of NCOIL, Troy, N.Y., and other NCOIL officers present that argument in a letter sent to the leaders of the congressional financial services committees.
Treasury Secretary Timothy Geithner has talked about putting the Federal Reserve Board in charge of oversight of “systemic risk” involving the biggest insurers, and Federal Deposit Insurance Corp. Chairman Sheila Bair has suggested creating a committee to oversee systemic risk.
NCOIL officers say there should be “an equal partnership between and among state and federal regulators to oversee systemic risk.”
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Systemic risk oversight should rely on “horizontal communication between and among regulators” because that would “avoid the dangers associated with consolidating power in any one agency or entity,” NCOIL officers write in their letter.
Designating a single federally managed systemic regulator could lead to regulatory capture, bias in favor of one particular financial sector or perspective, and inadvertent loopholes, the NCOIL officers write.